ASX:SGQ Income Statement Oct 3rd 17
When will SGQ need to raise more cash?
Opex (excluding one-offs) grew by 28.46% over the past year, which is rather substantial. This means that, if SGQ continues to grow its opex at this rate, given how much money it currently has in the bank, it will actually need to raise capital again in within the next 9 months! This is also the case if SGQ maintains its opex level of $6.7M, without growth, going forward. Although this is a relatively simplistic calculation, and SGQ may reduce its costs or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What this means for you:
Are you a shareholder? If SGQ makes up a reasonable portion of your portfolio, it’s always wise to consider cushioning your holdings with less risky, profitable stocks. You now have a better understanding of the risks you may face holding onto the stock, since we know the company could potentially run into some issues in the next couple of months. Now that we’ve accounted for opex growth, you should also look at expected revenue growth in order to gauge when the company may become breakeven.
Are you a potential investor? Loss-making companies are a risky play, especially those that are still growing its opex at a high rate. Though, this shouldn’t discourage you from considering entering the stock in the future. The outcome of my analysis suggests that if SGQ maintains the rate of opex growth, it will run out of cash within the year. An opportunity may exist for you to enter into the stock at an attractive price, should SGQ come to market to fund its operations.
Good management manages cash well – take a look at who sits on SGQ’s board and the CEO’s back ground and experience here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.